Despite resistance, Schaefer supports tax shift proposal Dissenters should create own city aid plan, he says.

January 21, 1992|By John W. Frece | John W. Frece,Annapolis Bureau of The Sun

ANNAPOLIS -- The Senate president doesn't like it, the state's tax collector says he can't enforce it, and Gov. William Donald Schaefer himself conceded last week that the idea is all but dead.

But Mr. Schaefer still says that he will introduce legislation that would help Baltimore by giving a small part of the state's piggyback income tax to the jurisdictions where taxpayers earn the money, rather than those where they live.

Mr. Schaefer said yesterday that he knew the idea -- designed primarily to help cash-poor Baltimore -- was already in trouble in the legislature.

Washington-area lawmakers call it a "commuter" tax and fear that if Maryland imposes it, the District of Columbia will follow suit.

But if lawmakers don't like his plan, Mr. Schaefer said, they should come up with one of their own.

If they don't figure out some way to help poorer jurisdictions, he said, he won't support a companion proposal to let local governments increase their maximum piggyback tax from 50 percent to 60 percent.

That, he explained, would only widen the gap between the state's richest and poorest subdivisions.

"It [raising the piggyback tax] doesn't do much good if it just increases the disparity," he said.

Maryland's piggyback tax is actually a surcharge on the state income tax that goes to the taxpayer's county of residence. Most jurisdictions impose the maximum 50 percent rate.

Schaefer's proposal would divert 5 percent of the first 50 percent to the city or county in which the taxpayer earns his money.

Senate President Thomas V. Mike Miller Jr., D-Prince George's, says he opposes the governor's plan, and Comptroller Louis L. Goldstein says he doesn't have the information necessary to calculate who gets what.

Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee, agreed yesterday that the so-called "commuter" tax idea probably was dead, but said lawmakers were looking for a substitute to help the city.

Politically, the legislature has no other choice, he said.

Any budget-cutting scheme is sure to include millions of dollars in reductions in local aid programs. Lawmakers say they can make large cuts in local aid only if they give Baltimore and the 23 counties authority to raise their own tax revenue.

But Mr. Levitan said there's no way to get the piggyback tax increase through without the votes of Baltimore's nine senators, and there's no way to get those votes without helping the city.

"We can't get Baltimore City's vote without that, and if we don't get Baltimore City's vote, we can't pass it anyway," he said.

Sen. John A. Pica Jr., D-Baltimore, chairman of the city's Senate delegation, said he has introduced alternate legislation to help the city.

His bill would establish a "disparity grant" for the city and other poor jurisdictions whose per capita income tax collections are below a certain percentage of the average.

But the plan has received only lukewarm support because it would cost the state approximately $60 million at a time legislative leaders are projecting a $1.2 billion deficit.

To pay for such a program, Mr. Pica's bill calls for extending the state's 5 percent sales tax to cover newspapers and non-prescription drugs, and reducing by half the fees the state pays to businesses that collect and remit sales taxes.

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